I have a uniform. Almost everyday I can be found in a plain white pocket t-shirt, Levi’s, and white Chuck Taylors. I mix in a variety of trucker or chore coats, a handful of watches, and my thick framed Tom Ford glasses I’ve just replaced every few years since 2011.

I like classic styling that has been cool from James Dean to Coleman Domingo. Makes things easy for me. Last night someone at a happy hour for a client asked if loafers with socks were in. I said, “I have no idea.”

And for a while I thought I had found the perfect white tee for my uniform. It was literally named the Uniform T and Everlane made it to be a staple in the wardrobes of the millennial professional. It was classic and timeless, the brand built on transparency and sustainability, and at a price point that said this is quality but for every day.

I was as middle middle of their ICP as one can be.

Then the shirts got thinner. The prices went down. And I found myself drifting to other brands once again hunting for the elusive perfect every day white tee.

I wasn’t surprised then to see the headlines it had been sold. It bummed me out, sure. But this was a long time coming. What did surprise me was the narrative that has since followed.

From The New Yorker

From NPR

Business Insider

GQ

Glossy

Vogue

Vox

Wall Street Journal

…and The Atlantic

You get the point.

And maybe I’m just feeling attacked because this was my uniform. A part of my identity. These headlines feel a bit like a condescending I-told-you-so. Adorable that millennials thought capitalism could bring positive change.

But a month later I still can’t shake this and I think it’s not sitting right not because it poked at something true I didn’t want to admit.

Because it’s bullshit.

The articles all select their favorite flavor of the narrative with most feeling more like an opportunity to support a prior thesis than any real analysis. It was change in culture, it was inflation, it was shifts in fashion, it was broken trust, it was a flawed price/value exchange.

One article went on about how it represented a shift from the Obama-era optimism and hope for collective betterment to the Trumpian aggression for individual conquest (paraphrasing… it was a long article).

And maybe I’m just another example of that because, surprise! I am here to fire off some blame of as well. And at my own favorite narrative heel: Venture Capital.

But here’s why I think I’m right. Because brands, and yes brands built on values, have survived every type of shift imaginable. And this isn’t like there weren’t customers.

There weren’t ENOUGH customers.

These articles keep pointing to, or more cowardly eluding to with pointed questions (looking at you GQ and Vogue), a broken business model of sustainable and ethical fashion.

But that wasn’t the business Everlane was in. That’s where it started out for sure. And I’d argue that’s where it was successful. But somewhere around the capital raised reaching $100 million plus, the business changed.

It was no longer a fashion company. It was a venture product.

A fashion brand makes money like this:

Revenue
- Expenses
= Profits

But a VC fund makes money like this:

Sales of companies
- Investment in companies
= Returns

They get investors to give them money. They take a small percent of that money to pay the salaries and overhead of their team (2%) and then they get to keep a percent of the returns they generate (20%).

Their returns come from an investment in a business that then sells for a lot more. Their “product” are the companies they invest in. And they don’t make money from a lot of businesses growing 30%. They make it from a few growing 5x year over year.

The business really looks like this:

Sales of 2-5 BIG winners
- Investment in 50+ losers
= Returns

Said another way, success is not in sustainability - VC’s have no use for a profitable business growing 10-20% - it’s in exponential growth. The goal is to get as many companies into the winners bucket. A good business doing just ok has the same utility as one that goes bust. As such, it’s better to burn all of them out in an attempt to turn them into a winner rather than run them profitably when the growth slows. All of them are just shots taken at a big windfall.

Let’s get back to Everlane.

In the early days it took off because something worked, something resonated. Now, maybe there is some truth to the articles saying that styles changed, culture changed, consumer behavior changed. Ok. But it didn’t go to zero.

It just couldn’t meet the ever increasing growth expectations.

To me this feels like a niche brand targeting a group of people with a specific style and specific set of values. A group that pays a premium for a plain white t-shirt. Maybe it’s the millennial my-mom-says-I’m-special talking here, but I think we’re a good group to target!

We were a group that spent a premium. We didn’t need Venture Capital to subsidize the value gap between cost and price. The whole premise of the company was that they’d say this is what it costs, mark it up, and we said, “yeah, that’s fair” and then we paid 4x the cost of a Target brand 5-pack.

But that market has limits to it. Not everyone is into that. Not everyone CAN be into it. The venture valuations, however, anticipated that everyone - or at least a lot more - WOULD.

The evidence is that when things stalled they did two moves that showed they didn’t get what the unique value was:

They went hunting for a broader consumer base to get the growth. A base that was price sensitive and at the same time increased the cost by adding infrastructure. Remember, the original value proposition was that in a DTC model the customer didn’t pay for all these unnecessary layers. They were transparent about that.

But Venture isn’t in the profitability game, they’re looking to sell for more than they paid. They’re looking to sell a BRAND not a business or cash flows. So here come the stores because it looks cool to have a hip NY or LA address. Lower prices show a larger base of customers. Bigger TAM! HIGHER VALUATIONS!

It doesn’t work though because that’s not what people were paying for. I didn’t want an Abbot Kinney showroom. I didn’t want lower prices and cheaper quality.

It became like everything else competing on price and ad spend. And in those conditions, yes, the latest trends and cheapest prices win. Not the classic, timeless style and durable quality. Not sustainability or transparency.

The endless pursuit of growth boils things down to the lowest common denominator and strips things of everything that makes them unique and interesting. And that’s what happened here.

Everlane’s sales decline, the next round isn’t coming, so it sells to private equity - also in the business of selling for more than they pay - who closes locations, moves factories, cuts costs, and discounts to juice sales. And then they sell it. A failed experiment they will say.

But it wasn’t. This wasn’t the only company of this era to go through this and not all of them were fashion, not all of them were about “ethical” or sustainable business models. In fact, very little ties a lot of these brands of the 2010’s together except:

All Birds, TOMS, Casper, Blue Apron, Outdoor Voices, Food52. Not all of them went bust, some hobbled along from PE firm to PE firm or got absorbed by larger brands.

Maybe some of them really didn’t work. Maybe some have found a lane that works for them now. But they’re all part of this narrative that somehow keeps avoiding the real problem.

Take the statement from the original founder of Everlane:

His message is 42 words and he says we’re running it back, baby.

He says nothing about the product. He says nothing about the brand. Nothing about the strategy, the styles, the marketing, the team, or even the industry!

He says the principles will be the same.

And the funding will not.

A fifth of the words in this message are to say what he WON’T be doing again - raising venture or private equity.

This wasn’t a failure of “good” brands, sustainable fashion, ethical consumers, or millennial ideals.

It was a failure of aligned capital. And if anyone is still confused why I am so hung up on this, why this continues to be the boogeyman I bang pots and pans in the town square warning about, why I make hats the say “Bootstrap Cashflow”… THIS is why.

We need ethical brands, we need sustainable companies. But we can’t throw anything with potential into the business model of boom or bust lottery tickets.

Let’s let businesses find their points of supply and demand equilibrium and thrive while delighting their unique customers. Not everything has to have a binary outcome. The power law might be the best strategy for venture capital. It isn’t the best strategy for building beloved brands and achieving aspirational industry change.

Thanks for reading. We’re going to get back to a regular cadence for this so I hope you stick around for more articles like this. If you’d like us to tackle any particular topics or questions, shoot them over to me.

…AND… we’re launching a podcast where you’ll be able to hear these rants straight from my face. And hopefully they’ll spark ideas and conversations and enthusiasm around whatever you’re building.

Best,

Chase “make ethical cool again” Spenst

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